The Danske Bank Group has decided on a climate change strategy because we believe that the financial sector must take a responsibility in finding a solution to the problem just as other industries, governments and the general public must do their part.
Climate change and the global response to it are also vital issues for today’s financial markets, and the many uncertainties about current developments present both potential risks and opportunities for the sector.
Opportunities in a carbon-restrained economy
The Stern review calls climate change “the greatest and widest-ranging market failure ever seen”. Part of the solution is therefore to promote sound market signals on the price of fossil fuels and greenhouse gasses.
We believe that the financial services sector plays a vital role in providing the financial infrastructure to support a low-carbon economy. The Danske Bank Group has therefore made it a priority to develop new products and services supporting innovation and the reduction of emissions.
Regulatory risks
The main risk currently blocking the development of an efficient carbon market stems from the lack of a long-term international agreement on carbon reductions. The lack of long-term regulations on carbon reductions, the uncertain outlook for the substitution of renewable energy schemes and similar factors make it risky for financial institutions to engage in these markets. It is very difficult to tell even what industries will be the winners and losers in a carbon-restrained future, since the regulatory framework is unknown.
A post-Kyoto agreement should be made as soon as possible so that the markets can adapt. Without clear, long-term regulation, the risk of inefficient and costly half-measures is high.
Last updated/revised on January 31, 2008